How To Deduct The Cost Of A Vehicle Used In Business


Operating a vehicle that’s used in your own business has its advantages when it comes time to pay your yearly taxes. You can use the costs associated with that business vehicle as a deduction when you file your taxes. These type of vehicles include pickup trucks, cars or SUVs and are used when you conduct business activities. To help you determine the actual deduction that you use, you will need to compare the standard mileage rate method with the actual vehicle expenses that you make.

Using The Standard Mileage Rate

The standard mileage rate figure that the IRS uses may change each year. If you used a vehicle for business in 2017, you are allowed to deduct 53.5 cents for each mile traveled when you traveled for business activities. You can easily track this number by using two figures:

– Write down your total number of miles driven for the year
– Write down your mileage when you use your vehicle for business purposes

On the first day that you decide to use your vehicle for a business activity, record the odometer reading. This is your starting figure. At the end of that business activity, record the odometer reading. If you do this each time that you use your vehicle for business during the last fiscal year, you will have a starting figure and ending figure for each business trip.

In 2017, if you started with an odometer reading of 2500 and ended at 3500, your total mileage traveled during the year would be (3500-2500 = 1000) 1000 miles. Now, take each mileage figure for the odometer reading when you traveled for business and deduct that from your total mileage. This will give you your total business miles. Let’s say used your vehicle for three business related trips last year — (46 miles, 38 miles, 106 miles, 65 miles, 22 miles and 83 miles = 360 total business miles). You would have used your vehicle 36 percent (360 divided by 1000 = 36%) of the time for business

Business Mileage Allowed

The IRS has guidelines on the types of business matters that are allowed for this deduction. If you are using your vehicle to conduct business matters, you can use that mileage. These would include trips to purchase parts, discuss business plans with a lawyer, survey a site for a new commercial building. You are not allowed to include commutes back and forth from your work. In addition, if you stop at a store for personal reasons before driving home, you would write down the odometer reading at the store as the ending figure for your business matters.

Using Actual Vehicle Expenses

The other method that you can use is associated with the actual vehicle expenses that you make during the last fiscal year. Here are typical auto related expenditures that can be used:

– Oil and gas
– Repairs and maintenance
– Licenses
– Auto insurance
– Automobile tires
– Lease or rental payments
– Depreciation
– Rent for a garage

Note that some vehicle expenses can also be used for the standard mileage method:

– Interest paid for a vehicle loan
– Payments for registration fees or taxes
– Payments for parking fees or tolls

Comparing Each Method

To give an example of each method, we will use the following figures for your vehicle expenses in 2017 (Total expenses = $3800):

– Gas, oil and repairs $2000
– Registration fees and taxes $300
– Loan payments $1000
– Auto insurance $500

Now, let’s say you traveled 5000 miles during 2017 and your business miles were recorded as 3000. You used your vehicle 60 percent of the time for business related matters (3000 divided by 5000 = 60%). In this case, you could deduct $2280 (60% of $3800) if you use the actual expenses method.

You could deduct $1605 (3000 x 53.5 cents) if you used the standard mileage rate method.

In this case, it would be best for you to use the actual expenses method to deduct the cost of the vehicle that you used in business for 2017. If you use other factors has expenditures such as depreciation, you will need to follow certain rules and guidelines from the IRS. It’s best to talk to an accountant or conduct research at the official IRS website.